Single Mom Insurance

Single Mom CPA Insurance Guide

Post Series: The Basics

Single moms, you need insurance – many kinds of insurance.

Figuring out which types and how much coverage you need can be overwhelming, especially if you’ve never had to be in charge of this before. That leads so many single moms to stick just with what they get through work plus any insurance required by law…or ignore it all together.

And when you’re struggling to make ends meet, insurance seems like an obvious place to cut back. But that’s a mistake.

Insurance is your financial safety net. Without the right insurance, you and your family could end up in a perilous financial situation – you could lose everything.

So today we’re going to talk about which kinds of insurance you really need (and some that you can go without).

  1. Life insurance. You are a single mom. Your kids depend on you financially. And if you die before they can take care of themselves, they will desperately need financial support. This is one policy single moms don’t want to skimp on – figure out how much life insurance you think you need, and buy a little more than that.Not quite sure how to figure out your coverage needs here? One commonly used estimating tool called the DIME method can get you started:
    D is for Debt: Add up all of your debt (except your mortgage). Make sure to include your car loan, student loans, credit cards, medical bills, and every other penny you owe.  Once you have that total, add on a reasonable amount for your funeral expenses.

    I is for Income: Multiply your current income by the number of years until your youngest child will reach age 21. For example, if you make $60,000 a year, and your youngest child is 11, that would call for $600,000 ([21-11] x $60,000) to make up for your lost income.

    M is for Mortgage: Contact your mortgage company to find out how much you would need to pay off your house completely.

    E is for Education: Estimate your children’s future college costs. The easiest way is with an online college cost calculator.

    Total up the four categories to come up with your total coverage needs.

    Keep in mind, if you’re divorced, your agreement might require a minimum amount of life insurance, and you can’t get less coverage than that – but you can get more. Also check the paperwork to see if you’re required to name your ex as the policy beneficiary.

    Which kind of life insurance policy should you get?

    In most circumstances, it makes sense to buy a term policy…less expensive, pure life insurance that expires after a set time period. Sometimes, though permanent (also called whole life) insurance – which includes a savings component so the policy builds value over time – may be the better choice; it never expires as long as you pay the premiums. Permanent insurance might make sense if, for example, you have a disabled child who will need to be supported for his whole lifetime.

  2. Health insurance. Health care costs pile up, especially when there are kids in the mix. You may have health insurance through your job – and that’s great. If not, get some. Yes, health insurance can be expensive…but health care costs can be surprisingly high. A single hospital visit (concussion, broken ankle, meningitis, etc.) could wipe you out financially if your family isn’t covered. And even annual checkups, maintenance medications (asthma inhalers, for example), and occasional sick visits can add up to a budget-busting amount without insurance to cover at least some of the costs.
  3. Long-term disability insurance. Single moms rely on their paychecks, and losing out on months of pay is simply not possible. If you’ll be out of work for months – or longer – due to illness or injury, this policy replaces the lion’s share of your salary while you’re laid up. Your best bet is to cover at least 65% of your current pay, so you have enough to live on until you’re back on your feet.What about short-term disability?Many employers offer short-term disability insurance. If yours does, get it. If not, think twice before buying a short-term disability policy – especially if you have a healthy emergency fund. If you can cover a short absence from work, you don’t need to waste money on these premiums.
  4. Car insurance. Most states in the U.S. require car insurance for every car on the road. Even if your state doesn’t make you get it, car insurance is a good idea. Causing even a simple fender bender (like when you turn around for one second because your kid is crying, then bump…) could cost you thousands of dollars – and that’s if only the other car gets hurt, and not any people. At the bare minimum, get liability coverage, which pays out when you damage someone else’s car or property, or injure someone. If you can afford it, consider collision coverage, which covers the costs of damage to your car, and (depending on your policy) may even replace it if your car gets totaled.
  5. Homeowners insurance. Repairing, reconstructing, or replacing your home and its contents would be unmanageable for any single mom without homeowners insurance. Make sure your homeowners policy covers the replacement cost of the structure (your house itself) and contents (all of your stuff), covers your costs if you have to stay somewhere else while your home is being repaired, and includes liability in case someone gets hurt on your property (especially if you have a dog or a swimming pool).This insurance has you covered if a major snow storm knocks the gutters off your house…your hot water heater explodes and floods your basement…a tree branch crashes through your dining room window…or your house gets burglarized and all of your electronics and jewelry are stolen. Disasters do happen, and having this insurance gives you one less thing to worry about.

    Renters insurance

    Renters insurance is a pared down version of homeowners insurance. It doesn’t need to cover the structure – that’s your landlord’s problem – so it’s designed to cover your belongings from theft and disaster. Again, make sure your policy covers the replacement value for your stuff.

  6. Long-term care insurance. If you’re under age 55 and in reasonably good health, don’t bother with long-term care insurance now. As you approach age 55-60, or if have (or develop) complicated health issues, long-term care insurance is a must. Most people think Medicare covers long-term rehab, hospital stays, hospice, and home care – it doesn’t. And Medicaid only kicks in when you become impoverished. Long-term care insurance picks up the cost of nursing home, rehab centers, hospitals, and home care so the financial burden won’t fall on your kids. The younger you start (age 52, for example), the better your chance of locking in relatively low rates. And if your parents don’t have this insurance and they’re not already in a long-term care situation, talk to them about getting coverage…so their costs don’t fall on you.
  7. Umbrella insurance. Congratulations! If you need this insurance, it means you’re doing well financially. Umbrella insurance kicks in when you’re being sued, and you have money to lose. After your car insurance or homeowners insurance coverage runs out (for example, you have $100,000 personal injury coverage on your car insurance, but the other driver’s medical bills top $250,000) or something happens that you don’t have coverage for (your toddler breaks a priceless collectible), umbrella insurance covers the costs and your legal fees. If your net worth is greater than your liability coverage, get an umbrella policy to protect your assets.

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